ASHWINKUMAR ARBAN CO-OPERATIVE SOCIETY LTD.,,SURAT vs. PR. COMMISSIONER OF INCOME TAX - 1, SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 653/Srt/2023 (Assessment Year 2018-19) (Physical hearing) Ashwinkumar Arban Co- Principal Commissioner of operative Society Ltd., Income Tax-1, Surat. Vs. 7-8, Hiranagar-2, Patel Nagar, Varachha A.K. Road, Surat- 395008 (Gujarat) PAN No. AABTA 0698 R Appellant/ Assessee Respondent/ Revenue

Assessee represented by Shri Sapnesh Sheth, C.A. Department represented by Shri S.M. Keshkamat, CIT-DR Appeal instituted on 30/09/2023 Date of hearing 11/12/2023 Date of pronouncement 14/12/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned Principal Commissioner of Income Tax, Surat-1, Surat (in short, the ld. Pr.CIT) dated 15/02/2023 passed under Section 263 of the Income Tax Act, 1961 (in short, the Act) for the Assessment Year (AY) 2018-19. The assessee has raised following grounds of appeal: “1. On the facts and circumstances of the case as well as law on the subject, the learned Pr. Commissioner of Income Tax has erred in passing revisionary order u/s 263 of the I.T. Act, 1961 by setting aside the order of ld. Assessing Officer passed u/s 143(3) of the I.T. Act, 1961 dated 01/02/2021 for the year under consideration

ITA No. 653/Srt/2023 Ashwinkumar Arban Co-Op Society Ltd. Vs Pr.CIT

although said order is neither erroneous nor prejudicial to the interest of revenue. 2. On the facts and circumstances of the case as well as law on the subject, the learned Pr. Commissioner of Income Tax has erred in observing that interest income of Rs. 8,40,577/- from co-operative bank is not allowable either u/s 80P(2)(a)(i) or 80P(2)(d) of the I.t. Act, 1961. 3. It is therefore prayed that order passed by Pr. Commissioner of Income Tax u/s 263 of the I.T. Act, 1961 setting aside the order of Assessing Officer and directing Assessing Officer to pass fresh assessment order may please be quashed.” 2. Perusal of record shows that the impugned order was passed by the ld. Pr.CIT on 15/02/2023, however, the present appeal is filed on 29/09/2023, thus, there is delay in filing appeal before this Tribunal. The Registry of this Tribunal has issued a defect notice pointing out delay of 166 days in filing appeal. The assessee has filed application for condonation of delay supported with affidavit of Sh Chhanabhai Anandbhai Savaj, Chairman of assessee-society. The learned Authorised Representative (ld. AR) of the assessee submits that there was no intentional or deliberate delay in filing appeal before the Tribunal. On passing order under Section 263 of the Act, the regular consultant of assessee initially advised the assessee that, a fresh order will be passed by the Assessing Officer and in the event of suffering/making addition, the assessee may file appeal before the higher authorities. However, in the month of September, 2023, when the assessee and his counsel/ consultant discussed the matter with the present Authorised Representative of the assessee, the assessee

ITA No. 653/Srt/2023 Ashwinkumar Arban Co-Op Society Ltd. Vs Pr.CIT was advised to file appeal before the Tribunal. However, in the meantime, time period for filing appeal before the Tribunal has expired. The ld. AR of the assessee submits that the assessee is not going to be benefitted by filing appeal belatedly. The delay was occurred due to misunderstanding of his consultant on law point to appreciate that the order under Section 263 of the Act is itself an appealable order. The ld. AR of the assessee submits that the assessee has good case on merit and is likely to succeed if the matter is heard on merit. The issue on merit is otherwise covered in favour of assessee. 3. On merit, the ld. AR of the assessee submits that the assessee is a cooperative society. In the computation of income, the assessee has claimed deduction of interest income earned from Cooperative bank, such deduction is claimed under Section 80P(2)(d) of the Act. The Assessing Officer accepted the return of income. Later on, the assessment was revised by the ld. Pr.CIT vide order dated 15/02/2023. The ld. AR of the assessee submits that before passing the order under Section 263, the ld. Pr.CIT issued show cause notice dated 22/12/2022 wherein only issue with regard to deduction under Section 80P(2)(d) of the Act i.e. interest received from cooperative bank was identified for revising the assessment order. The ld. AR of the assessee submits that it is now an admitted position under law

ITA No. 653/Srt/2023 Ashwinkumar Arban Co-Op Society Ltd. Vs Pr.CIT that the cooperative banks are cooperative societies and interest earned on deposit with the cooperative bank is eligible for deduction under Section 80P(2)(d) of the Act. The ld. AR of the assessee submits that there is a series of decisions by this Tribunal as well as by the Hon'ble Jurisdictional High Court and various other High Courts holding that the cooperative banks are primary cooperative societies and the interest income earned from cooperative bank is eligible for deduction under Section 80P(2)(d) of the Act. 4. On the other hand, the learned Commissioner of Income Tax- Departmental Representative (ld. CIT-DR) for the revenue on the condonation of delay submit that the Bench may consider the plea of assessee as per law. Though, the assessee should explain each and every day delay in filing appeal. On merit, the ld. CIT-DR for the revenue submits that if the issue is covered in favour of assessee as claimed, the assessee could very well explain such facts before the Assessing Officer in the proceedings initiated in pursuance of direction under Section 263 of the Act. The ld. CIT-DR for the revenue submits that he supports the order of ld. Pr.CIT as the assessing officer allowed impugned deduction without discussing the issue in the assessment order. There is no reference in the assessment order, if such issue was examined or verified by the assessment order while accepting the

ITA No. 653/Srt/2023 Ashwinkumar Arban Co-Op Society Ltd. Vs Pr.CIT claim of the assessee, thus, both the conditions of section 263 that is the order is erroneous and so far as prejudicial to the interest of revenue. 5. We have considered the submissions of both the parties and perused the record carefully. First we will consider the plea of assessee for condonation of delay. We find that the ld. AR of the assessee mainly raised a plea that the assessee could not file appeal due to ignorance and proper advice by their consultant/Chartered Accountant under the impression that only final order, if the assessee suffered in the order under Section 263 r.w.s 143(3) of the Act is required to file appeal. It is further contention of ld. AR of the assesse that the present appeal is filed on his advice that order under Section 263 is appealable before the Tribunal. We find that almost on similar facts and contention when appeal was filed belatedly, on the advice of senior advocate against the order under Section 263, the delay of 90 days in filing appeal was condoned by the Coordinate Bench of Kolkata Tribunal in Vinod Agarwal Vs Pr.CIT (2018) 89 taxmann.com 171 (Kol-Trib). Considering the fact that there is no intentional or deliberate delay and following the ratio of decision of the Coordinate Bench of Kolkata Tribunal in Vinod Agarwal Vs Pr.CIT (Supra), the delay of 166 days in filing appeal is condoned. Now adverting to the merit of the case.

ITA No. 653/Srt/2023 Ashwinkumar Arban Co-Op Society Ltd. Vs Pr.CIT 6. We find that the assessment for A.Y. 2018-19 was completed on 01/02/2021 in accepting returned income. We find that the ld. Pr.CIT issued show cause notice under Section 263 of the Act dated 22/12/2022 wherein the ld. Pr.CIT identified the issue of allowance/deduction under Section 80P(2)(a) or 80P(20(d) of the Act with regard to interest received from Surat District Cooperative Bank. We further find that no other issue was identified nor examined or issued any show cause notice on any other issue. The assessee filed its reply on 30/12/2022 wherein the assessee claimed that interest earned on FDR with Surat District Cooperative Bank is deductible under Section 80P. The ld. Pr.CIT while referring the decision of Hon'ble Karnataka High Court in the case of Pr.CIT Vs Totagars Co- operative Sale Society (2017) 83 taxmann.com 140 (Kar) held that interest earned by assessee from surplus deposit with cooperative bank is not eligible for deduction under Section 80P(2)(d) of the Act and such interest is required to be added to the income of assessee. The ld. Pr.CIT on such observation, set aside the assessment order dated 01/02/2021 with direction to pass fresh assessment order after taking into consideration the issues as may have been already considered together with the issue discussed by him. 7. We find that the Surat District Cooperative Bank is a cooperative society registered under Gujarat State Cooperative Societies Act. We

ITA No. 653/Srt/2023 Ashwinkumar Arban Co-Op Society Ltd. Vs Pr.CIT find that in a series of decisions, the various Benches of the Tribunals held that the cooperative banks are primarily cooperative societies and interest earned on deposits with such cooperative bank is exempt under Section 80P(2)(d) of the Act. The Hon'ble Jurisdictional High Court in the case of Surat Vankar Sahakari Sangh Ltd. Vs ACIT (2016) 72 taxmann.com 169 (Guj) also held that the assessee cooperative society was eligible for deduction under section 80P(2)(d) in respect of gross interest received from cooperative bank without adjusting interest paid to said bank. We further find that such decision of Hon'ble High Court in Surat Vankar Sahakari Sangh Ltd. Vs ACIT (supra) has been followed in a serious of decisions by the Division Bench of Surat Tribunal. No doubt that in the assessment order, there is no discussions of the issue of deduction of interest income earned by assessee on fixed deposits from Surat District Cooperative bank, still we found that the assessment is not erroneous on the deduction under section 80P(2)(d), as the same is consonance with the decision of Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd. Vs ACIT (supra) and the various other decisions of this Tribunal. Thus, the twin condition for invoking section 263 is not satisfied. Therefore, in view of the aforesaid factual and legal discussion, we find merit in the grounds of appeal raised by the assessee and we quash the order passed by the ld. Pr.CIT under

ITA No. 653/Srt/2023 Ashwinkumar Arban Co-Op Society Ltd. Vs Pr.CIT Section 263 of the Act. In the result, grounds of appeal raised by the assessee is allowed 8. In the result, this appeal of assessee is allowed. Order announced in open court on 14th December, 2023.

Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 14/12/2023 *Ranjan Copy to: 1. Assessee 2. Revenue 3. PCIT 4. DR 5. Guard File By order

Spr. Private Secretary, ITAT, Surat